Basic approach to corporate governance
Futaba understands the objective of corporate governance to be "having company management keep discipline from the perspective of diverse internal and external stakeholders in order to achieve a strong and sound company." We acknowledge the importance of building and improving organizational systems that allow corporate governance to function effectively, in order to conduct business activities in compliance with laws, regulations and social norms, as well as to enhance business transparency. To this end, we will continue to develop and enhance these systems with an emphasis on（1）faster-paced management with better strategic capabilities,（2）ensuring the transparency of corporate conduct, and（3）promoting disclosure and accountability.
Corporate Governance Report
Initiatives for strengthening corporate governance
Corporate governance is a foundation to support our sustainable growth, and we believe it essential to continue to evolve it based on social trends and needs. We have been striving for continuously strengthening corporate governance.
To enhance effective oversight of Directors and Executive Officers as required of the Board of Directors, we have been increasing the ratio of Outside Directors. In addition, in FY2021, we carried out a third-party assessment on the Board of Directors' effectiveness and addressed the problems and issues it identified. We intend to have a third-party organization assess the Board of Directors' effectiveness on a regular basis going forward.
Promotion system of corporate governance
（1）Board of Directors
Number of meetings held in FY2022: 12 times
The Board of Directors holds monthly meetings in principle, attended by seven Directors, including four Outside Directors. One of the Outside Directors is female. It discusses statutory and material matters, determines management strategies and provides oversight of the execution of business operations. In addition to the above members, four Audit & Supervisory Board Members, including two Outside Audit & Supervisory Board Members, attend the meeting. The Board of Directors resolves agendas based on laws and regulations and the Articles of Incorporation, and discusses important issues relating to the Company's course of action from mid- to long-term and a global perspective.
Main agendas discussed at the FY2022 Board of Directors' meetings
| Management in general |
|
| Other |
|
（2）Audit & Supervisory Board
Number of meetings held in FY2022: 15 times
The Audit & Supervisory Board holds monthly meetings in principle, attended by four Audit & Supervisory Board Members appointed at the general meeting of shareholders (two full-time Audit & Supervisory Board Members and two Outside Audit & Supervisory Board Members).
The Outside Audit & Supervisory Board Members consist of a certified public accountant, and a member who held directorships and similar positions at other companies. Leveraging their expertise by audit area, they implement statutory operational audits specified by the Companies Act, and accounting audits, of the Company and its subsidiaries at home and abroad.
Audit structure
The Company undergoes three types of audits: audit by Audit & Supervisory Board Members; internal audit by a unit that directly reports to the President; and audit by the Accounting Auditor that is an audit corporation. With a view to efficient and effective audits, Audit & Supervisory Board Members, the Global Internal Audit Office, and the Accounting Auditor meet at monthly three-way audit meetings and other opportunities to share audit plans and results, and exchange information on risks identified through respective audits. Moreover, to facilitate further information sharing, the Global Internal Audit Office holds a regular monthly meeting with full-time Audit & Supervisory Board Members, who share the information with the rest of the Audit & Supervisory Board.
Audit by Audit & Supervisory Board Members
Audit & Supervisory Board members audit the establishment and operation of the internal control system, the appropriateness of the accounting auditor's methods and results, and the quality of execution of duties by the directors and other executives, based on the auditing methods determined by resolution of the Audit & Supervisory Board in accordance with company policy and priority matters. Specifically, the members attend the Board of Directors meetings, the Internal Control Committee 19 meetings, and other important meetings. In addition to receiving reports from directors or other executives on the execution of duties, they perform tasks such as verifying the contents of reports by the internal audit division and conducting interviews with top management both in and outside Japan.
Internal audit
We have the Global Internal Audit Office in place, which is tasked with reporting to the Company's management, including Outside Directors, on the summary of its internal audit results, the urgency of the problems identified, proposed improvements, and other matters in order to provide reasonable assurance regarding the status of auditees. In addition, it offers advice and proposals aimed at strengthening and enhancing the Company's internal control. The Office shares the audit results at Internal Control Committee meetings as well, thereby giving opportunities for individual departments to learn the best practices and issues of other departments and Group companies and to gain insight therefrom.
Audit by Accounting Auditor
PricewaterhouseCoopers Japan LLC has been auditing the Company since FY2019.
（3）Nominating Committee
Number of meetings held in FY2022: 10 times
The Nominating Committee consists of five committee members（three Outside Directors and two Inside Directors）. The Chairperson is appointed from Outside Directors, with Mr. Masaki Horie currently serving in the position. As an advisory body to the Board of Directors, it deliberates matters related to the appointment and dismissal of Directors and Executive Officers from a fair and objective perspective, and submits recommendations to the Board of Directors.
Main matters discussed at the FY2022 Nominating Committee meetings
- Nomination of Director candidates
- Appointment of a Representative Director
- Appointment and dismissal of Executive Officers and Officers
- Assignment of duties to Executive Officers and Officers
- Consideration of succession plans for those officers including the President
（4）Compensation Committee
Number of meetings held in FY2022: Six times
The Compensation Committee consists of four committee members (three Outside Directors and one Inside Director). The Chairperson is appointed from Outside Directors, with Mr. Masayoshi Ichikawa currently serving in the position. As an advisory body to the Board of Directors, it deliberates the compensation system and standard, and the amount of compensation of Directors, Executive Officers, and others from a fair and objective perspective, and submits recommendations to the Board of Directors.
Main matters discussed at the FY2022 Compensation Committee meetings
- Monthly compensation for Directors, Executive Officers, and Officers
- Amounts of Bonuses for Directors, Executive Officers, and Officers
- Restricted stock compensation for Directors, Executive Officers, and Officers
- A vision for the compensation system for Directors, Executive Officers, and Officers
（5）Executive Meeting
Frequency of meetings: Once a month in principle
The meeting is composed of the President and Executives, and deliberates and resolves highly confidential matters among items for decision-making regarding business execution.
（6）Center Chief Meeting
Frequency of meetings: Twice a month in principle
The meeting is composed of the President, Chief Officer, and full-time Audit & Supervisory Board Member, and discusses matters to be submitted to the Board of Directors, other important matters and individual issues.
Approach to internal control
Based on the "Futaba way," "Management Principles," and "Futaba Code of Conduct," We will conduct our business appropriately, throughout the Futaba group（FUTABA）. In addition, for endless improvement on quality of business and management, we implement the cycle of improvement through TQM（Total Quality Management）, with following activities. We will also aim to sustainably improve the corporate value toward the SDGs goals.
- a.Implementing operational system, including the concept of the internal control system such as three lines（Control for Risks, Guidance, Internal check and Internal audit）
- b.Clarifying roles and responsibilities among the group and realizing autonomy of subsidiaries
- c.Implementing education system regarding TQM activities and standards to enhance the ability of entity
Furthermore, FUTABA aims to enhance sustainable corporate value with our goals of the SDGs We develop people with high ethical standards through these activities. Then, build an effective organization to implement our designated internal control.
Internal control system
We share with Directors and other Officers responsible for business execution the attitude expected in performing business operations properly in accordance with the Companies Act and other laws and regulations. Matters to be submitted in accordance with the rules are discussed thoroughly at the Board of Directors meetings and others, and executed after proper decision making.
In actual business operations, the Internal Control Committee promotes the internal control activities within the Company as an advisory body to the Board of Directors. In addition, we have established the Working-level Meeting on Internal Control under the Internal Control Committee to promote the practical aspects of internal control. The Internal Control Committee has set the FUTABA Management Standard as the benchmark of management standard and good quality requirement, and divisions in the headquarters promote the improvement activities of operational quality as the promotor of our global organization. We aim to improve the corporate management quality through the improvement activities of operational quality, and as a result, to secure the internal control of our global organization.
Status of the activities of the Internal Control Committee are reported regularly to the Board of Directors. The global progress of the improvement activities of operational quality is considered when determining the direction of activities, in addition to the advice received from the Board members by sharing issues identified at each region and site.
Criteria for appointment and dismissal of Directors and
Audit & Supervisory Board Members
The Board of Directors emphasizes the balance of skills, experience and expertise as well as diversity and suitability of Directors in their appointment, dismissal and nomination, in order to ensure the function of the Board of Directors and to make accurate and swift decisions. The Nominating Committee was voluntarily established in December 2018, as an advisory body to the Board of Directors chiefly composed of Independent Outside Directors. In case of appointment, dismissal, and nomination of Directors, the Board of Directors receives recommendations with reasons for individual appointment, dismissal, and nomination from the Nominating Committee and then decides at the Board of Directors meetings. Starting from the general meeting of shareholders in 2019, the Committee's input has been reflected in the proposals for appointment, dismissal, and nomination of Directors.
In case of the appointment and dismissal of the Audit & Supervisory Board Members, we appoint persons who can contribute to appropriate management audit with the knowledge of business management, finance, and accounting. The Board of Directors obtains the consent of the Audit & Supervisory Board via the latter's resolution, whereupon it decides on the candidates and submits proposals for appointments of Audit & Supervisory Board Members to the general meeting of shareholders.
Board of Directors and
Audit & Supervisory Board Members skills matrix
The competencies and experience of the Company's Directors and Audit & Supervisory Board Members are as follows.
| Corporate management | Technology and development | Production engineering, manufacturing, and quality | Sales and procurement | Finance and accounting | Legal affairs and governance | Personnel | IT and DX | Environment | Overseas business | ||
|---|---|---|---|---|---|---|---|---|---|---|---|
| President | Yoshihiro Uozumi | ○ | ○ | ○ | ○ | ○ | ○ | ||||
| Representative Director, Executive Officer |
Fumio Ohashi | ○ | ○ | ○ | ○ | ○ | ○ | ||||
| Director, Executive Officer |
Toshio Yokota | ○ | ○ | ○ | |||||||
| Outside Director | Masaki Horie | ○ | ○ | ||||||||
| Outside Director | Masayoshi Ichikawa | ○ | ○ | ○ | ○ | ||||||
| Outside Director | Motoko Miyajima | ○ | ○ | ||||||||
| Outside Director | Yoshihisa Miyabe | ○ | ○ | ○ | ○ | ||||||
| Full-time Audit & Supervisory Board Member |
Kazunori Kato | ○ | ○ | ○ | |||||||
| Full-time Audit & Supervisory Board Member |
Keiichi Toriyama | ○ | ○ | ○ | |||||||
| Outside Audit & Supervisory Board Member |
Hitoshi Suzuki | ○ | ○ | ||||||||
| Outside Audit & Supervisory Board Member |
Shigeo Hayashi | ○ | ○ | ○ | ○ | ○ | |||||
Criteria for appointment of Independent Officers
We appoint Independent Officers in accordance with the criteria for externality as defined in the Companies Act and the criteria for independence as defined by the financial instruments exchange. In case of appointment, we place importance on a high level of expertise and wealth of experience that enable candid and constructive advice and supervision to management.
Reasons for appointment of Outside Directors and
Outside Audit & Supervisory Board Members
The Company appoints four Outside Directors and two Outside Audit & Supervisory Board Members to receive advice and suggestions from an external viewpoint to ensure appropriate decision making by the Board of Directors, in addition to benefitting from their fields of expertise.
Main reasons for appointment of Outside Directors and Outside Audit & Supervisory Board Members
| Name | Position | Independent Officer | Main reasons for appointment | Attendance in FY 2022 | |||
|---|---|---|---|---|---|---|---|
| Board of Directors | Nominating Committee | Compensation Committee | Audit & Supervisory Board | ||||
| Masaki Horie | Outside Director | ○ | Mr. Masaki Horie has expertise and experience acquired over many years as a certified public accountant. His appointment will bring his wealth of experience and deep insight into the Company's management. | 12/12 （100%） |
10/10 （100%） |
6/6 （100%） |
― |
| Masayoshi Ichikawa | Outside Director | ○ | Mr. Masayoshi Ichikawa has many years of experience as corporate manager at Toyoda Gosei Co., Ltd. His appointment will bring his wealth of experience and deep insight into the Company's management. | 12/12 （100%） |
10/10 （100%） |
6/6 （100%） |
― |
| Motoko Miyajima | Outside Director | ○ | Ms. Motoko Miyajima has expertise and experience acquired over many years as an attorney at law. Her appointment will bring her wealth of experience and deep insight into the Company's management. | 12/12 （100%） |
10/10 （100%） |
6/6 （100%） |
― |
| Yoshihisa Miyabe | Outside Director | Mr. Yoshihisa Miyabe has knowledge on the production engineering division acquired over many years at Toyota Motor Corporation. His appointment will bring his wealth of experience and deep insight into the Company's management. | 12/12 （100%） |
― | ― | 4/4 （100%） |
|
| Hitoshi Suzuki | Outside Audit & Supervisory Board Member | ○ | Mr. Hitoshi Suzuki has expertise and experience acquired over many years as a certified public accountant. His appointment will bring his wealth of experience and deep insight into the Company's management. | 11/12 （91%） |
― | ― | 15/15 （100%） |
| Shigeo Hayashi | Outside Audit & Supervisory Board Member | ○ | In addition to his experience as Director and Senior Managing Executive Officer at Olympus Corporation, Mr. Shigeo Hayashi also has experience from serving in that company's Production Engineering Division. His appointment will bring his wealth of experience and deep insight into the Company's management. | 10/10 （100%） |
― | ― | 11/11 （100%） |
- *1 Director Yoshihisa Miyabe was nominated as an Audit & Supervisory Board member at the 107th Ordinary General Meeting of Shareholders, held on June 17, 2021. At the 108th Ordinary General Meeting of Shareholders held on June 22, 2022, he was appointed as an outside director.
- *2 Audit & Supervisory Board member Shigeo Hayashi was nominated as an Audit & Supervisory Board member at the 108th Ordinary General Meeting of Shareholders, held on June 22, 2022.
Support for Outside Directors and
Outside Audit & Supervisory Board Members
In order to deepen the understanding of Outside Directors and Outside Audit & Supervisory Board Members on our business execution, we have each division submit reports and hold plant tours of the Company and subsidiaries for them, in addition to holding a preliminary briefing on matters to be submitted to the Board of Directors.
For Outside Audit & Supervisory Board Members, we have set up Audit & Supervisory Board Office as an organization to support the auditor's duties and assigned dedicated staff members.
Training for Directors and Audit & Supervisory Board Members
For Directors and Audit & Supervisory Board Members who play key roles in the important governance system, we hold seminars on laws and regulations related to corporate officers, in order to deepen their understanding on their roles and duties. Furthermore, we provide regular training session for Directors and Audit & Supervisory Board Members focusing on medium- to long-term issues, while arranging their participation in outside seminars and inviting outside professionals to workshops as necessary.
Executive Compensation
Basic approach
Compensation for Directors is set at the level competitive enough to secure and retain talented persons to realize the Management Principle as well as to motivate them to fulfil expected roles toward the sustainable improvement of corporate value and shareholders' value. Specifically, compensation for Directors who assume business execution is composed of monthly compensation, bonuses, and stock compensation. Compensation for Outside Directors who assume oversight function is composed of monthly compensation only. Regarding the content of compensation for Directors, we ensure rationality, objectivity, and transparency in both of the content and the decision procedure, in order to fulfil accountability to shareholders and other stakeholders.
Calculation method
| Type of compensation | Monthly compensation | Bonus | Stock compensation |
|---|---|---|---|
| Ratio | 60% | 30% | 10% |
| Eligible position | Directors, Audit & Supervisory Board Members | Directors （excluding Outside Directors） |
Directors （excluding Outside Directors） |
| Calculation method | The amount is determined according to positions and responsibilities, etc., and reviewed as appropriate to be competitive enough to secure and retain talented persons in the job market, in view of our corporate performance, standards of other companies, and social environments. | The amount is calculated by the Board of Directors in view of consolidated operating profit of each fiscal year and the level of achievement of targets determined in the medium-term management plan, and the amount and the timing of payment are determined by the resolution of the annual general meeting of shareholders. | In order to share values with shareholders and drive the motivation to contribute to enhancing the medium- to long-term corporate value and shareholders' value, the Company allocates restricted stocks to a Director responsible for business execution with restriction on transfer until the Director retires from the position in principle as a reward for business execution every fiscal year, and grants monetary claims to be used for payment in exchange for allocated stock at a certain period every fiscal year. The number of shares to be allocated is determined in view of positions, responsibilities, share price, etc. |
Matters regarding individual Directors' monthly compensation are entrusted from the Board of Directors to the Representative Director on the condition that they will be decided by the voluntary Compensation Committee, majority of whose members are Independent Outside Directors. Subject to the approval of a general meeting of shareholders on the total amount of Directors' Bonus, the Board of Directors entrusts matters regarding individual Directors' bonuses to the Representative Directors on the condition that they will be decided by the voluntary Compensation Committee.
The Representative Directors later report to the Compensation Committee on the actual monthly compensation and bonus payments made to individual Directors to make sure that those correspond to the Compensation Committee's approval.
For stock compensation for Directors, the number of shares to be allocated to individual persons is determined by the resolution of the Board of Directors, taking into account the deliberation and recommendation of the Voluntary Compensation Committee. Compensation for Audit & Supervisory Board Members is determined through consultation among them.
Matters regarding Director's individual monthly compensation is entrusted from the Board to the Representative Director on the condition that it will be paid based on individual monthly amount decided at the voluntary Compensation Committee composed of a majority of Independent Outside Directors. Subject to the approval of the general meeting of shareholders on the total amount of Directors' Bonus, the Board entrusts matters regarding Director's individual bonus to the Representative Director on the condition that it will be paid based on individual bonus decided at the voluntary Compensation Committee. The Representative Director later reports to the Compensation Committee the actual monthly compensation and bonus payments made to individual Directors to make sure that they agree with Compensation Committee's approval.
For stock compensation for Directors, the number of shares to be allocated to individual persons is determined by the resolution of the Board of Directors, based on the deliberation and recommendation of the voluntary Compensation Committee.
Amount of compensation for Directors and Audit & Supervisory Board Members
| Category | Total amount of compensation （million yen） |
Total amount of compensation by type（million yen） | Number of Directors/ Audit & Supervisory Board Members paid （persons） |
|||
|---|---|---|---|---|---|---|
| Monthly compensation | Bonus | Stock compensation | Retirement benefits for executives | |||
| Directors （excluding Outside Directors） |
126 | 96 | 20 | 10 | ― | 6 |
| Audit & Supervisory Board Members （excluding Outside Audit & Supervisory Board Members） |
15 | 15 | ― | ― | ― | 1 |
| Outside Director | 22 | 22 | ― | ― | ― | 4 |
| Outside Audit & Supervisory Board Member | 19 | 19 | ― | ― | ― | 4 |
*The figures above include the three Directors and one Outside Audit & Supervisory Board Member who stepped down at the close of the 108th Annual General Meeting of Shareholders held on June 22, 2022.
Assessment of the Board of Directors' effectiveness
We aim for continuous improvement of the Board of Directors, by conducting questionnaire surveys yearly to Directors and Audit &Supervisory Board Members and analyzing them to see whether the Board of Directors is effectively fulfilling its roles and duties. The FY2022 assessment of the Board of Directors' effectiveness was conducted by the Company on its own in October to November 2022 in the form of a questionnaire survey of all the Directors and Audit & Supervisory Board Members. A total of 31 questions were asked to assess the Board of Directors' composition, operation, discussions, monitoring functions, and other items. Based on the survey results, effectiveness improvement actions for FY2023 were reported to the Board of Directors in December 2022.
| Issues identified in FY2021 | Actions taken in FY2022 | |
|---|---|---|
| Composition of the Board of Directors |
|
Revised the ratio of Inside and Outside Directors in order to shift to a structure that enables the Board to perform more effective supervision from an objective standpoint |
| Operation of the Board of Directors |
|
Allocated time to discuss matters on the Company's directions and mid- to long-term strategies from a global perspective |
| Discussions at Board of Directors meetings |
|
Revised the criteria for matters to be submitted to Board of Directors meetings to make effective use of discussion time (stipulating that matters relating to individual operations be approved at Center Chief Meetings) |
Overall results of FY2022 assessment
- Scores were generally high for all the items surveyed. This has led us to conclude that the Company's Board of Directors functions effectively.
- The measures introduced in FY2022 to improve the Board of Directors' operation and discussions have invigorated debate on important management issues.
- Given that new issues were identified, however, further actions are needed to enhance the Board of Directors' effectiveness.
| Issues identified in FY2022 | Actions being taken | |
|---|---|---|
| Discussions at Board of Directors meetings |
Discuss even broader issues including the following:
|
Utilizing the longer discussion time afforded by the FY2022 reform, the Board of Directors regularly discusses issues that need to be addressed to adapt to a changing external environment. Directors receive regular reports on the progress on and the outcomes of our annual policy and Group companies' policies. Based thereon, they discuss the direction we should take to address issues and grow on a global scale. |
| Operation of the Board of Directors | Provide Outside Directors and Outside Audit & Supervisory Board Members with enough time to consider and review the matters submitted | The timetable for preparing for a Board of Directors meeting shall be revised to allow Outside Directors and Outside Audit & Supervisory Board Members enough time to consider and review the matters submitted. |